Pandora Media Inc. (P) is set to report FQ4 2014 earnings after the market closes on Wednesday, February 5th. Pandora is the leading provider of online radio. Earlier this month the company announced December audience metrics which trumped analyst expectations and sent the stock price soaring. The stock price has continued to rip higher and Wall Street is expecting a 59% year over year increase in revenue despite increased competition from Apple's (AAPL) recently launched iTunes Radio. Here's what investors expect Pandora to report.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Pandora to report 7c EPS and $198.75M revenue while the current Estimize.com consensus from 30 Buy Side and Independent contributing analysts is 6c EPS and $197.35M revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Pandora to miss the Street's expectations on both profit and revenue.
Over the previous 6 quarters the consensus from Estimize.com has been more accurate than Wall Street in predicting Pandora's profit and revenue 3 and 4 times respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more highly correlated fashion to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing an average differential compared to previous quarters.
The distribution of estimates published by analysts on the Estimize.com platform range from 4c to 8c EPS and $187.00M to $202.75M in revenues. This quarter we're seeing a smaller distribution of estimates compared to previous quarters on profit and a wider distribution on revenue.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A smaller distribution of estimates signaling more agreement in the market, which could mean less volatility post earnings.
Throughout the quarter, the EPS consensus from Wall Street increased from 3c to 7c while the Estimize.com forecast inched higher from 5c to 6c. Over the same period of time Wall Street has raised its revenue expectation from $186.5M to $198.75M while the Estimize community elevated its consensus from $193.74M to $197.35M. Timeliness is correlated with accuracy and surging analyst revisions going into a report are often a bullish indicator.
The analyst with the highest estimate confidence rating this quarter is WallStreetBean who projects 7c EPS and $198.00M in revenue. In the Winter 2014 season, WallStreetBean is rated as the 20th best analyst and is ranked 9th overall among over 3,750 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, WallStreetBean is expecting Pandora to report in-line with Wall Street on profit but come up short on revenue.
This quarter contributing analysts on the Estimize.com platform are expecting Pandora to come up slightly short on Wall Street's expectations. Because the Estimize.com consensus is a better benchmark for how stock prices react to earnings, if Pandora meets the Street's numbers or beats we could see the stock push even higher.
Disclosure: No positions